Question
Under M&M with corporate taxes Theory, Which of the following statements is most correct? Question 20 options: A.) Since debt financing raises the firm's financial
Under M&M with corporate taxes Theory, Which of the following statements is most correct? Question 20 options:
A.) Since debt financing raises the firm's financial risk, raising a company's debt ratio will always increase the company's WACC.
B.) Since debt financing (after-tax) is cheaper than equity financing, raising a company's debt ratio will always reduce the company's WACC.
C.) Increasing a company's debt ratio will typically reduce the marginal cost of both debt and equity financing; however, it still may raise the company's WACC.
D.) Statements a and c are correct.
E.) None of the statements above is correct
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